Capital Mobilization Management of Commercial Banks

With high economic efficiency, the capital needs of all individuals and organizations are handled by commercial banks much more effectively than other sources in the financial market. However, in order for commercial banks to meet all capital needs in the economy, it is first of all required that commercial banks themselves handle capital mobilization work well. The more professional and effective the organization of capital mobilization work is, the more effective the mobilized capital will be, thereby improving the efficiency of lending and investment activities of banks, meeting well the capital needs for development investment in the economy. The greater the capital needs for development investment, the more the capital mobilization work of commercial banks must be strengthened.

* Role in currency control

Capital mobilization helps the central bank effectively control the flow of money in the economy.

Controlling the flow of money in the economy is the responsibility of the Central Bank and the Central Bank through the implementation of its monetary policy to control it. However, the monetary policy of the Central Bank to be effective must go through the intermediary channel of credit institutions, the most important of which is through commercial banks. Capital flows in the economy are often very diverse and complex, they need to be tightly controlled to ensure the general policy orientation, improve the efficiency of monetary capital in the economy and, more importantly, not to let the money flows move according to speculative trends in the financial markets, creating unexpected consequences for the macroeconomic environment. All these requirements will be handled effectively through the capital mobilization channel of commercial banks. Reality proves that if the banking system operates effectively, all idle capital in the economy is mobilized to the banking system, there will be less possibility of speculative activities that make the financial market always complicated. Although the business objective of commercial banks is not to

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to help implement the monetary policy of the Central Bank; however, as a matter of course, commercial banks must always comply with the monetary policies of the Central Bank. Moreover, at all times, commercial banks must pay attention to capital mobilization because this is an important source of liquidity for commercial banks. This is the natural premise that helps the Central Bank effectively control the flow of money in the economy.

* Role in commercial banks' business activities

HDV contributes to creating the premise for commercial banks to operate safely and effectively.

Due to the nature of a financial intermediary, which is to borrow to lend and provide other financial services, mobilized capital always plays a decisive role in the business of commercial banks. In other words, if the capital mobilization work of commercial banks is not given due attention, the business activities of banks will be negatively affected, weakening their competitiveness and even affecting the issue of liquidity safety of banks. Therefore, to ensure the safe and effective business activities of commercial banks, the decisive issue is still the capital mobilization work.

2.2.2. Capital mobilization management of commercial banks

Management of commercial banks' capital mobilization includes the following contents:

2.2.2.1. Planning capital mobilization strategy

Strategic planning is always an important factor in general business activities, in which, for banking business activities, it is of special importance, because this is the vital business sector of the economy, there cannot be "problems" that will lead to "problems" of the entire economy with a much larger "amplification" level. In order for banking business activities to take place smoothly, it is necessary to attach importance to planning work, improve the quality of business strategy planning. In other words, the commercial banking system must operate strategically for the economy to function.

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The capital mobilization strategy of a commercial bank can be understood as a comprehensive and long-term program of activities, aiming to create a certain development step in the capital mobilization work of the bank, a prior commitment to the basic and comprehensive goals in capital mobilization that the bank needs to achieve and the allocation of important resources to achieve those goals in the future operating environment.

Strategy is a long-term plan with basic orientation at many different levels (either general level, or strategic business unit level), or operational function level. Strategy is often very flexible, with the ability to adjust depending on business conditions and environment factors. The strategy of HDV always aims at certain goals and objectives that the bank needs to achieve in the future. The nature of the goals and objectives determines the strategic directions and solutions.

For bank managers , capital mobilization strategy planning is essentially a process of researching and finding solutions to the relationship between the bank and its business environment. In other words, this is the process of the bank finding answers to comprehensive and long-term questions: (i) Where is the bank currently in the financial market?; (ii) Where does the bank want to go in the future in capital mobilization activities? (or the future goals and typical images of the bank?);

(iii) In what basic direction and way do managers coordinate resources to achieve the goals set in future human resource management work?;

(iv) How to identify and ensure that NH will achieve the desired goals, position and image?

The objectives of planning the capital mobilization strategy of commercial banks are: (i) To proactively detect opportunities to take advantage of and avoid risks, in order to increase profitability and minimize possible losses associated with capital mobilization; (ii) To allow executives and employees to know

Which direction will the bank go in? What are the basic goals in capital mobilization? What should be focused on? What will be the priority in time order? How to achieve the necessary results in capital mobilization?; (iii) It is the basis for determining the future image in capital mobilization of commercial banks; (iv) Which commercial banks applying strategic management will bring better capital mobilization efficiency?

Disadvantages of implementing strategic capital management in commercial banks: (i) The process of establishing a strategic capital management model requires a lot of time and effort; (ii) The implementation of strategic management can disrupt and disrupt business operations because the thinking and management style have not kept up with innovation. Therefore, the implementation of strategic management can be costly, time-consuming and require a lot of effort; (iii) The goals and strategies when established can become rigid once they are written down, which can lead to failure in implementing the strategy in resource mobilization; (iv) Errors in environmental forecasting, especially in the long term, are often very large, causing the capital mobilization strategy to go in the wrong direction; (v) It is possible that banks put a lot of effort into planning their capital mobilization strategies, but are too careless or pay little attention to the implementation stage, which may lead to the capital mobilization strategy not bringing the expected results. The above shortcomings make some commercial banks doubt the usefulness of capital mobilization strategy management.

* Content of capital mobilization strategy in commercial banks

- Identify strategic goals in the HDV

Is the determination of the purpose, the specific results that the bank seeks to achieve when pursuing its mission over a relatively long period of operation .

There are three issues to note in determining strategic objectives: (i) Ensuring relevance; (ii) Need to determine the list of objectives in the strategic plan; (iii)

Classify the goals.

- Requirements for the relevance of strategic goals

Specificity . The right goal must be specific, showing the specific final results to be achieved when carrying out certain actions with specific time and space limits. The more specific the goal, the easier it is to plan directions and strategic solutions for implementation. Normally, goals at the Headquarters level are often highly general. Goals at the Branch, regional, and functional levels will be specific and detailed.

Measurability . The more specific a goal is, the more clearly it must be measurable, expressed in absolute or relative numbers (competitiveness expressed by market share, ability to expand market share measured by the number of branches in localities, etc.).

Unity or consistency . When determining strategic goals in the strategy, it is important to always pay attention to consistency, the completion of one goal must not hinder the completion of another.

Feasibility. Objectives should be the overall results that the bank can achieve in the environment in which it actually operates, consistent with the bank's capabilities (not a hypothetical environment).

Flexibility . In the process of determining goals, it is necessary to ensure that there is enough flexibility and the ability to adjust to suit the risks and opportunities that occur in the actual business environment (however, changing and adjusting too often will lead to confusion in strategy and action policies).

Challenging . The content of the goal must be challenging based on high expectations so that employees have to really strive to complete it, encouraging exploration and creativity to achieve high results. (Note: If the goals are too ambitious and unrealistic, they will be counterproductive because they will make people discouraged, lose confidence and the strategy will become just an illusion, not a reality.

able to execute).

- Identify the list of goals

There are 2 target groups : Qualitative and quantitative.

(i) Qualitative target group: Is a prior commitment to results expressed in certain characteristics that the Bank needs to achieve after each business period. For example: Quality of the Bank's products and services, reputation of the Bank in the financial market, position of the Bank in the market, etc.

(ii) Quantitative target group. It is a prior commitment to certain results that the bank needs to achieve after each business period, expressed at a specific level and measured by certain metrics. For example: The scale of mobilized capital, market share of capital mobilization, capital structure by term, by customer, by currency, etc.

Both of these target groups are used by commercial banks to evaluate their capital mobilization activities in a specific period. The capital mobilization strategy of a commercial bank for a certain period cannot be simply a group of qualitative or quantitative targets, because they cannot accurately reflect the capital mobilization results of a commercial bank.

- Target classification

The strategic goals set must be divided into different levels: There must be a system of goals at the Headquarters level as well as a system of goals at the functional level (Marketing, Finance, TD, Treasury, Human Resources, etc.)

The outcome of goal hierarchy will lead to a certain hierarchy of strategies.

Sales target, scale of operation : Mobilized sales, number of new branches; number of ATMs; number of additional employees; number of additional customers; number of accounts opened; number of services provided...

Market domination target: market share ratio (compared to the whole industry, to competitors, to leading banks, etc.); Type of depositors; Scope

HDV area

Objectives on the quality of HDV activities : Quality of banking services; Quality of management team and staff; Quality of banking technology; Quality of communication...

* Analyze the external business environment – Identify opportunities and risks

Analysis of the external business environment . Including the macro environment, micro environment (Economy; Politics, laws and government policies; Culture - society; Technology; Population; Natural factors; International factors; existing competitors; customers; Potential competitors; Alternative financial markets)

Identify opportunities and risks

Macro environment (general environment): Includes general factors such as: Economy; Politics; Law; Government policy; Culture - Society; Population; natural environment; World... These factors affect all business sectors and all financial institutions (not just the banking sector). In general banking business, especially capital mobilization, economic, legal and policy factors often have the strongest and most direct influence, but other factors cannot be ignored.

Micro environment : Includes factors within the banking industry and related to the operations of the bank's capital mobilization, it determines the nature and level of competition within the industry for capital mobilization work in commercial banks. In other words, micro environment factors create different pressures on the capital mobilization work of commercial banks.

Economic factors : Changes in the environment, such as: Stages of the business cycle; Inflation; GDP growth rate; Prospects of industries using bank capital; Structural shifts between economic sectors;

The level of price stability, interest rate; Unemployment; Ability to integrate into the world market; International balance of payments… will affect the ability of commercial banks to mobilize resources. Therefore, this factor needs special attention. For example: Interest rate reduction → Risk of reducing the ability of commercial banks to mobilize capital; Local economic decline will affect people's income and savings…

Political, legal and policy factors of the Government . Compared to other business sectors, the State has stricter control in terms of law and policy in terms of competition, deposit insurance, equity capital scale, etc. Therefore, it is necessary to regularly and thoroughly analyze the business of commercial banks, especially in the work of capital mobilization. For example, in Vietnam in recent years, some commercial banks have mobilized gold from the people. In principle, gold is also currency and therefore commercial banks can mobilize it, but because the State Bank has issued regulations restricting or even prohibiting the mobilization of gold, so if commercial banks mobilize gold, they will violate the law.

Financial and monetary policies (interest rates, exchange rates, taxes, etc.) also need to be thoroughly analyzed. For example: If the State imposes taxes on people's savings deposits, it will cause people to limit their deposits in banks. Or the tendency of the Central Bank to adjust the exchange rate, this will cause a movement of currency and this will affect the ability of banks to mobilize capital in the future...

Socio-cultural environment. Including: Consumer culture, habits of using banking services, saving and investment habits, behavior in communication, life expectations, religious and ethnic communities, etc. These factors are of great value in strategic analysis. However, understanding socio-cultural issues is difficult because they are not easily recognizable.

Technology . This is a factor that needs to be taken into account, because in the industry

In the banking industry, technology changes very quickly and it really becomes a breakthrough in competition. Therefore, commercial banks need to grasp new technology trends to avoid being outdated and losing their competitive advantage.

Population. Including population structure by age, gender, income, living standards, etc., population structure has a decisive influence on the scale and structure of deposits.

International factors : It is necessary to monitor and grasp world economic trends, discover prospective markets, learn about political and economic developments, and experience in international capital mobilization.

Competitors . It is necessary to pay attention to the following aspects: Who are they? What do they want to achieve in resource mobilization? What are they doing and can do to mobilize resources? Their influence on the market? Their strengths and weaknesses in resource mobilization?

Customer . Need to pay attention to: Customer's credibility? Negotiation and bargaining ability? Relationship record with the bank? Loyalty level? Their attitude towards the customer's credit services provided by the bank? Understanding of the customer's credit service process? Sensitivity to service quality or interest? ...

Alternative financial markets . Instead of using traditional deposit services, customers tend to switch to other markets: Investing in the stock market, investing in real estate, self-financing by issuing bonds or stocks... The more alternative financial markets develop, the more the risk of banks' capital mobilization will decrease in both scale and structure.

* Internal environment analysis – Identify strengths and weaknesses

Marketing factors : (i) Ability to research the customer market and marketing information system; (ii) Existing and future competitive position in the market; (iii) Ability to clearly identify target deposit customer groups; (iv) Level of diversification of service portfolio and development of peripheral services, derivative services, new services; (v) Quality of bank deposit services; (vi)

Deposit service distribution and transaction network; (vii) Deposit interest rate; (viii) Ability to assess depositor satisfaction; (ix) Customer loyalty;

(x) Goodwill, trust and reputation, image of the Bank.

Human resource factors . Including: (i) Quality of leadership and management; (ii) Quality of staff in terms of expertise, communication, sense of responsibility, enthusiasm, professional ethics; (iii) Internal atmosphere; (iv) Policies on recruitment, training, maintenance and development of human resources; (v) Incentive and motivational measures; (vi) Level of staff transfer or resignation; (vii) Number of permanent staff corresponding to scale and performance; (viii) Dynamism in using human resources...

Financial factors . Including: (i) Ability to mobilize deposits and borrow in financial markets; (ii) Ability to mobilize long-term capital and equity; (iii) Cost of capital compared to the whole industry and competitors; (iv) Liquidity; (v) Ability to control costs and reduce capital costs; (vii) Ability to adjust funding sources; ...

Facilities and service equipment . Including: (i) Transaction office and transaction points; (ii) Customer service equipment; (iii) Banking technology level; (iv) Documents, papers and physical means serving the process of distributing HDV services.

Internal organization and management . Including: (i) Current organizational structure of the Bank;

(ii) Organizing internal communication information system; (iii) Internal control, inspection and audit system; (iv) Organizational atmosphere and discipline; (v) Capacity and dedication of leaders at all levels; (vi) Office etiquette and culture of the bank; (vii) Ability to control and prevent risks, especially preventing interest rate risks.

Strengths : Need to be classified: (i) Extremely strong; (ii) Strong; (iii) Dominant.

Weaknesses : Need to be classified: (i) Extremely weak; (ii) Weak; (iii) Less advantageous.

Opportunity : Is a situation in which the achievement of goals and the conduct of activities of the bank are favorably affected by some environmental factors.

For example:

Sustainable economic growth in the market areas where banks operate; The State cuts taxes on the banking and financial sector...

Risk : Simply understood as a situation in which the implementation of the bank's capital mobilization target does not have favorable impacts or is hindered by environmental factors. For example: Risk of being pushed out of the target capital mobilization market by competitors; Risk of reducing the quality of capital mobilization services due to technological backwardness; Risk of losing capital due to uncontrolled risks...

* Strategy setting

Proposing strategic options : Including reviewing the reasonableness or correctness of pre-selected strategic goals, from which, proposing options to implement them. The diversity and complexity of strategic options often make it difficult to express and classify them. However, strategic options can be divided into two basic groups:

Growth strategy/option group :

(i) Inward growth strategy group:

- Concentrated growth strategy: Focus on improving and expanding existing services or markets without changing any other factors. These include: (i) Market penetration: Seeking additional market share for existing services in existing markets through better marketing efforts to increase the number of accounts, increase the number of customers, increase the frequency of transactions; (ii) Market development. That is, dividing existing traditional services into new market areas or new customer groups (opening new branches in potential markets, expanding new customer groups); (iii) Product development. That is, adding new services to existing markets by improving or upgrading previous services with higher service quality or cross-selling services to existing customers.

- Expansion growth strategy. This type of strategy focuses on adding new financial services to create new markets, such as:

Add new HDV services to create new markets.

(ii) Outward growth strategy group:

- Merger strategy: Merge with another bank to form a new bank with a new organizational structure. This is currently a trend.

- Acquisition strategy. A bank acquires another bank by buying shares to gain control of that bank, but still maintains its identity and organizational structure, or acquires financial companies, securities companies, etc. to add to the new service portfolio, including capital mobilization services. The acquired units become branches or member companies; (iii) Joint venture strategy. Occurs when two or more banks join forces to carry out an issue that a single bank cannot do, without affecting the ownership rights of the two parties. There are many forms of joint ventures: 1/ International joint ventures to overcome political and cultural barriers to be able to legally compete in the international market; 2/ Joint ventures to take advantage of each other in capital mobilization; ...

Group of options/strategies for decline:

- Cost-cutting strategy. This is a temporary strategy to rearrange the operation of the HDV to be more effective, when some areas have low productivity, causing the cost of mobilizing resources to become too high, or due to temporary difficulties related to business environment conditions (cutting administrative costs, advertising, laying off employees...).

- Strategy to cut some business areas. Occurs in the direction of selling or closing some affiliated Transaction Offices with the purpose of recovering investment capital in ineffective departments, or focusing capital on some activities and areas with long-term prospects...

- Harvest strategy. Is to find ways to maximize the circulation for immediate purposes regardless of long-term consequences. This strategy is often applied to banks or member units of banks that are about to collapse and cannot be recovered. For example : stop capital activities and lending, sell assets.

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